For a competitive firm (price-taker), a. If it increased price, total revenues would riseb. If it increased price, total revenues would rise, but profits could fallc. If it increased price, both total revenues and profits would rised. If it increased price, all revenues would disappear

Question

Business

Camilla Wagner

2 June, 09:57

For a competitive firm (price-taker), a. If it increased price, total revenues would riseb. If it increased price, total revenues would rise, but profits could fallc. If it increased price, both total revenues and profits would rised. If it increased price, all revenues would disappear

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Answers (1)

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Zaire Kirk · Answer 1

The answer is D. All revenue would disappear

Explanation:

In a competitive firm, there are large numbers of buyers and sellers that no one can influence the market price. Also, the sellers sell identical goods e. g market for salt.

The buyers have perfect knowledge about the market (they are aware of the prevailing market price.

Because the goods and services are identical and the buyers are aware of the prevailing market price, if a firm increases its own price, buyers will not buy from him at all, thereby making the seller's revenue to disappear.